It may be harder to get a loan for an inner-city apartment, according to an expert.

Ryan Dhue, executive director of The Mortgage Gallery, said the lending criteria for apartments was often tougher than for a traditional suburban family home.

Mr Dhue said most lenders regarded loans for inner-city apartments as a higher risk and demanded a higher deposit.

"Generally, inner-city apratments are restricted by most lenders to an 80 per cent Loan Value Ratio, which means the borrower has to have a 20 per cent deposit", he said.

"There may be some lenders who will provide a higher LVR, but at a higher interest rate.

"In contrast, subject to meeting lenders' criteria, lenders can generally fund a 95 per cent LVR for a suburban home and, in some cases, even up to 100 per cent of the purchase price."

He advised aparment buyers to take not of the living area.

"Apartments with living space under 50sq m can sometimes be more difficult to finance," he said.

"In addition, in areas where there may be an oversupply of inner-city apartments, it may be more difficult to secure a home loan".

He said mortgage insurance was another consideration.

"Because of the restriction to LVRs for inner-city apartments, people buying (one) will generally not have to consider paying mortgage insurance," he said.

"Mortgage insurance is a one-off insurance payment when the LVR usually exceeds 80 per cent and it protects the lender against any potential losses in the event of having ato sell a property if the loan is in default.

"It can add several thousands of dollars to the overall cost of financing the purchase of a property.

"The number of stories in the apartment complex is also an important consideration for lenders, because the number of apartments may impact on a mortgage insurer's decision to underwrite the loan and they may require that the LVR be reduced and the deposit increased".

Source: Bronwyn Frazer, Sunday Times